Economics: Inflation and wage hike effects on household income and formal jobs
The inflation readings of Coneval’s food and non-food baskets have both been outpacing headline consumer inflation. The drastic changes in the composition of consumption that Mexican families have undergone during the current coronavirus pandemic imply that the evolution of the NCPI fails to distinguish the specific increases that low income households are encountering when acquiring the goods and services they depend upon. Any analysis of just how much real wages have fallen needs to take into account indexes that reflect the rise in prices for priority goods, which have risen faster than headline consumer inflation because such baskets consist of products for which demand has by no means subsided even as supply problems have arisen.
These developments suggest the need to moderate contract wage demands if Mexico is to avert further job losses. The base wages used for computing social security dues and benefits experienced major increases during the pandemic, but that was as a result of formal sector job losses being concentrated in the segment with the lowest incomes. This means that the average wage was higher due to the fact that those who managed to remain in the formal sector had higher wages than those who lost their jobs, but it also marks a broader process toward increasingly precarious work, in which more people were pushed into non-standard or temporary jobs that tend to be poorly paid, insecure, and offering insufficient resources for supporting a household. To that picture we must add a much more extensive loss of paid work in the informal sector.
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